Written by Peter Olszewski
Friday, 04 April 2008
Courtesy of Phnom Penh Post at http://www.phnompenhpost.com/
Cambodians are learning that peace and stability comes with a price, and currently that price is a booming increase in the cost of land which, over the past two years, has risen in some areas by 200 to 300 percent.
This of course is a boon for landowners, but for the landless, or those who don’t have a clear title to their property, it’s a bane.
It’s an old story, of how one man’s fortune becomes another man’s plight as the rich get richer and the poor become landless, or in some cases find themselves landless thanks to land grabs.
For every story about a new land development in Phnom Penh, there seems to be half a dozen stories about yet more poor people being dispossessed of land or evicted.
The Cambodian land boom, in keeping with the times, is a global phenomenon, with word spreading internationally that the new gold rush in Cambodia is in fact a land rush.
In late January this year, Australia’s premier finance paper, the Australian Financial Review, alerted its well-heeled readers that there are big bucks and quick bucks to be made from investing in Cambodian land.
Nick Chandler, an Australian who is now the sales and marketing manager for the Brocon group in Phnom Penh, told the Post, “When a newspaper like the Australian Financial Review pumps out an article like that, you know something is up.”
On March 16, a syndicated Associated Press news feature alerted global investors to the opportunities in Cambodia, saying, “Prime city land prices have tripled over the last two years to $3,000 per square meter, which has drawn rich and middle-class Cambodians, as well as those living abroad.”
But no sooner had AP’s report about land at $3,000 per square meter gone on the wires, the price surged beyond that figure up to a seeming stratospheric $5,000 per square meter plus. And it’s still rising.
“Prices have jumped 200 to 300 percent and they’re still jumping,” Dith Channa, sales manager of Phnom Penh-based CPL Cambodia Properties Ltd, told the Post on March 21.
“What was $1,000 to $2,000 a little over a year ago is now $5,000 to $5,500; what was $800 to $1,000 is now $2,500 to $3,000.”
The hottest land on the market, according to Dith Channa, is found in Phnom Penh’s riverside precinct, the area near the Royal palace and the signature streets such as Norodom Boulevard.
But the land price boom is spreading across the Kingdom.
“Land price increases were at first isolated to Phnom Penh, Siem Reap and Sihanoukville, but now the price of land is jumping up everywhere – the boom is across Cambodia,” Channa said.
“Other hot spots are the border areas with Vietnam and Thailand and, to a lesser extent, Laos.”
The current forecast for property prices is that the only way is up, and that although local prices have soared, they are still low in comparison with neighboring countries like Thailand.
“Property prices will continue to increase because our prices are cheap compared to neighboring countries. The price will continue to increase and increase,” Channa speculated.
Demand drives the price of land, but the reason for the demand is new-found confidence among international and local investors in the Cambodian market.
“Property is hot due to the stability of politics; foreign investors worry about war and instability, and with the 2008 elections about to unfold, more foreign investors will come here,” Channa said.
“Local investors are now also 100 percent sure that nothing more will happen. They feel confident about that.”
Cambodia’s political stability has certainly changed the nature of the flow of capital into the Kingdom. A decade ago most foreign capital entered as aid, but investment has now outstripped aid as revenue.
At a press conference in February, Sok Chenda, secretary-general of the Council for the Development of Cambodia, revealed that approved foreign investments from 1994 to 2007 totaled $14.83 billion, with China accounting for $1.76 billion and South Korea $1.5 billion.
Channa said that Koreans rank among the biggest land investors, followed by the Chinese, with money also starting to flow from Malaysia, Australia and even Switzerland.
Chandler of the Brocon Group said, in his opinion, the major driver for the increase in land prices, particularly in the capital, has been the ever-increasing influx of foreign money into Cambodia, particularly from the Koreans who have big development plans here.
He added that the surge in land prices is also partly due to simple speculative investment.
“People are buying land without necessarily a view to development – they are buying simply with the hope that the value will keep increasing,” he said.
With such speculation rife, the key question becomes whether the boom can sustain itself or whether Cambodia is entering into a property bubble.
Chandler noted that in Australia, as property prices soared over the decade, pundits continually predicted a bubble and a subsequent crash, but it has not ensued. Australian property values keep on rising, sometimes dramatically, sometimes incrementally.
With Cambodia, Chandler feels there will be some easing off as property value is traditionally cyclical, but he doesn’t foresee a big bust.
“I don’t think there is going to be a dramatic fallout, but there could be a mild fallout when critical mass is attained.
“But then again, people have been saying that about Ho Chi Minh City in Vietnam. For the last five years people have been predicting that the land price increase will stop, but it hasn’t.
“Whereas land in Phnom Penh is going for $3,000 to $4,000 a square meter, $15,000 a square meter is common in Ho Chi Minh City.
“It probably will slow down here, but I don’t know when.”
Chandler pointed out that Phnom Penh property values are “on everybody’s radar” at the moment, with reports about the land boom an almost daily occurrence in the international press.
“The property boom in this region first happened in Thailand, then Vietnam and now it is Cambodia’s turn. Ultimately the money will look for somewhere else to go and maybe in the next five or ten years, it might be Burma’s turn.”
In Siem Reap land values are also on the rise, but not as dramatically as in Phnom Penh .
Luon Thean, managing director of Open Gate Real Estate Co Ltd, told the Post the price of land in Siem Reap is going, “up, up, up.”
Jean-Yves Navel, marketing executive of Heritage Real Estate Co Ltd said, “The price of land is now very high in town. It has been pushed up by speculation and inflation, and I don’t know where it will stop.”
He said land values in Siem Reap have risen 25 to 30 percent every year for the last four years at least, and whereas the average price of land per square meter is hovering around the $500-$600 mark, the premium price in the downtown tourism precinct is now $1,600 per square meter.
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